Why transaction volume on Bitcoin’s Lightning Network is surging

Transactions on Bitcoin’s Lightning Network are surging — but who’s really using it?

The Lightning Network has been promoted by Bitcoin maxis like Twitter co-founder Jack Dorsey, who last year integrated the layer 2 into his payments platform, Cash App.

Bitcoiners argue that Lightning will help the big orange coin become — in the words of Dorsey — “everyday money”: skirting transactions around the main chain cuts costs and increases speed, allowing people to use Bitcoin for daily purchases.

And the data would have you believe that it is working. Bitcoin brokerage River this month posted figures showing that transactions on the second-layer solution in November hit $1.1 billion, much to the delight of Bitcoiners on Crypto Twitter. In the same period in 2024, volume stood at $286.5 million.

Though the picture appears to be more complicated, experts told DL News.

What’s it really for?

Despite in the past being pushed for smaller transactions, Lightning, which debuted in 2018, isn’t just being used for microtransactions like tipping or buying a cup of coffee.

“We are seeing larger transactions go through right on a regular basis,” Jesse Shrader, co-founder of Bitcoin infrastructure firm Amboss, said.

He added that his company had seen Lightning transactions surge by 300% since January, and the average size of a Bitcoin transaction now stands at 74,000 sats — worth $50 at today’s price of $67,714 per coin.

Lightning made headlines this month when American crypto exchange Kraken helped facilitate a $1 million transaction on the network.

“By dramatically reducing settlement times, the Lightning Network unlocks Bitcoin’s potential at global scale, and we’re proud to help bring that future into reality,” Kraken’s head of onchain, Calvin Leyon, said of the transaction.

Indeed, exchanges using Lightning to move money may be the reason why transaction volume has spiked.

“The average transaction value on the Lightning Network has actually increased and it goes to show that it’s not so much peer-to-peer payments for coffee or whatever — it’s more like a settlement between exchanges or between businesses,” Spencer Yang, a managing partner of crypto investment firm, BlockSpaceForce, told DL News.

He added that Jack Dorsey integrating Lightning into Square’s payment terminals could also be playing a part.

Payments company Block, the parent company of Square, last year debuted a new Bitcoin payments system, allowing merchants to accept the cryptocurrency over the Lightning Network.

It isn’t clear how many merchants are using the Lightning network to accept payments. Block did not respond to questions from DL News.

Bobby Shell, VP of marketing at Lightning infrastructure company Voltage, told DL News that nearly 29% of Bitcoin transfers pass through the layer 2, with Coinbase routing around 15% of its transactions on the network.

“This isn’t a niche anymore,” he said.

Privacy and price matters

But transaction volume may also be surging due to rising costs on other blockchains, Shrader said.

“Tether on Tron is probably one of the best examples,” he noted.

The cost of sending USDT on the Tron network has risen in recent years to nearly $4 per transaction. The network was once the go-to for small-dollar transactions because of its low costs. Cheaper blockchains, though, now exist.

Using Lightning, in comparison, can cost less than a fraction of a cent.

But another reason transaction volume has shot up may be down to its privacy-centric nature: Sending coins via Lightning is harder to trace compared to a standard Bitcoin network transaction.

“But at the end of the day, lightning is incredibly private,” said Shrader. “From a practical and a data analytics perspective, there’s not a lot that you can do to track it.”

Mathew Di Salvo is a news correspondent with DL News. Got a tip? Email at mdisalvo@dlnews.com.